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SEC Staff Issues Summary Report of Commission Staff's Examinations of Each Nationally Recognized Statistical Rating Organization


Washington, D.C., Sept. 30, 2011 — The staff of the Securities and Exchange Commission today issued a report summarizing the staff's observations and concerns arising from the examinations of ten credit rating agencies registered with the SEC as Nationally Recognized Statistical Rating Organizations ("NRSROs") and subject to Commission oversight.

The report notes that despite changes by some of the examined credit rating agencies to improve their operations, Commission staff identified concerns at each of the NRSROs. These concerns included apparent failures in some instances to follow ratings methodologies and procedures, to make timely and accurate disclosures, to establish effective internal control structures for the rating process and to adequately manage conflicts of interest. The report notes that the staff made various recommendations to the NRSROs to address the staff’s concerns and that in some cases the NRSROs have already taken steps to address such concerns.

“This report demonstrates the SEC’s enhanced oversight of credit rating agencies,” said Carlo V. di Florio, Director of the SEC’s Office of Compliance Inspections and Examinations (OCIE). “We have recruited experts and strengthened the overall monitoring and examination process to better protect investors, ensure market integrity, and facilitate capital formation.”

The Commission staff conducted the examinations as required by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection, which imposed new reporting, disclosure and examination requirements to enhance the regulation and oversight of NRSROs. Among other things, the Dodd-Frank Act requires the Commission staff to examine each NRSRO at least annually and issue an annual report summarizing the essential findings of the examinations.

“We are today issuing the first of the Commission staff’s annual reports on the examinations of the NRSROs,” said Norm Champ, the Deputy Director of OCIE. “We expect the credit rating agencies to address the concerns we have raised in a timely and effective way, and we will be monitoring their progress as part of our ongoing annual examinations.”

Examination staff from the Commission’s Office of Compliance Inspections and Examinations and NRSRO monitors from the Commission’s Division of Trading and Markets conducted these examinations. The following staff made significant contributions to these examinations: Abe Losice, Rina Hussain, Jon Hertzke, David Beaning, Kenneth Godwin, Said Rafat, Natasha Kaden, Harriet Orol, Alan Dunetz, Diane Audino, Scott Davey, Kristin DeVitto, Ethan Allfree, Jennifer Fournier, Lisa Jordan, Kenny Sabogal, Bernard Bujack, Shanti Radkar, Jackie Sturgill, William Beggs, Scott Follin, Trinita Love, Jason Wentworth, Shipra Wells, Linda Heaphy and Steven Gilchrist.

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For more information about the report, contact:
Carlo V. di Florio
Director, Office of Compliance Inspections and Examinations
(202) 551-6200

Norm Champ
Deputy Director, Office of Compliance Inspections and Examinations
(212) 336-0446

Abe Losice
Assistant Director, Office of Compliance Inspections and Examinations
(202) 551-6422

Jon Hertzke
Senior Special Counsel, Office of Compliance Inspections and Examinations
(202) 551-6247



Modified: 09/30/2011